concepts and operationalisation of pro-poor growth: a ... fileconcepts and operationalisation of...

Concepts and Operationalisation of

Pro-Poor Growth:

A Usable PPG Index

EADI Conference, Bonn 26 June 2014

Mario Negre

German Development Institute

World Bank Research Group

© 2012 German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

Outline

1. Introduction

2. Defining PPG

3. PPG operationalisation and indices

4. A usable PPG index

5. PPG Performance

6. Case Study

7. Conclusions

2


Introduction

Inequality increasingly recognised as key factor for Poverty Reduction...

(and perhaps for growth?)

Ravallion (2001):

i) g 7x more Pov reducing when Ineq

ii) ↑ Ineq ↓ Pov reduction rate

IMF: ↓ net Ineq robustly correlated with faster and more durable growth, for

a given level of redistribution (Berg, Ostry and Zetelmeyer, 2012) – somewhat flimsy

evidence (Kraay, forthcoming)

Somewhat contradictory evidence from cross-country literature (Dollar and Kraay,

2002; Kraay, 2006; Dollar, Kleineberg and Kraay, 2013)

Otherwise increasing academic evidence (political science, governance, stability, etc)

3


Defining PPG

Approaches:

Absolute Poverty reducing growth

Relative Disproportionally benefiting the poor

Absolute approach

reductio ad absurdum:

Pro-Poor = Pro-Nonpoor !

4


PPG Operationalisation

Shapley Decomposition (1953; Game Theory)

Shorrocks (1999) generalisation for Poverty: It calculates the marginal impact on

poverty of “eliminating each contributing factor in sequence, and then assigns to each

factor the average of its marginal constributions in all possible sequences.”

Exact Decomposition:

5


PPG Indices

Kakwani and Pernia‘s (2000) Kakwani, Son and

Khandker (2004)

+ per capita growth - per capita growth Poverty Equivalent

Growth Rate (PEGR)

Limitations:

Lack of comparability (+ vs. - growth)

Φ+, Φ- → ±∞ when G → 0, R → -G

Φ falls into two non-contiguous intervals for recessions (one of them not accounted for

in Kakwani and Pernia (2000))

Other problems of lack of meaning and monotonicity in PEGR

6


Problems with the Kakwani and Pernia’s index:

For the case of anti-nonpoor per capita recession:

i)

ii)

Unaccounted for

7


Problems with the PEGR:

1. First, when

2. Second, in per capita recessions

i) Anti-poor recession

The correct result should be:

ii) Anti-nonpoor recession with

The correct result should be:

8


iii) Anti-nonpoor recession with

with increasing over the interval

The correct result should be: and decreasing over this interval

9


A usable PPG Index

Φ = - R general for any poverty measure or income level

(Poverty Bias of Growth)

Based on PPG relative approach

PPG should satify these porperties:

i) It is + (-) when

ii) It is zero when

10


What about using the Headcount Index (H)?

If all the poor increase their income

without going above the poverty line and the nonpoor experience no change

it should be PPG but RH=0 because H didn‘t change

Thus, it doesn‘t satisfy desirable properties

11


What about using the Poverty Gap (PG)?

It satisfies properties and it can be mathematically linked to:

(For the case of constant population and number of poor)

Substituting

in

it can be shown that

12

iq

i

ii

n

i

i

z

xz

nzxI

z

xz

nPPG

11

1

11

1

1

2212

2

112 ,,,,

2

1xzPxzPxzPxzPR


…if you don’t believe me:

If the population and the number of poor remain unchanged,

N1 = N2 = N and q1 = q2 = q and the growth in the mean of the poor can be defined as:

13

2 1 2 1

1

1

2

1

2

2

1

1

2

2

1

2

1111

2

1 q

i

q

i

q

i

q

i

iiii xzN

xzN

xzN

xzNz

R

2 1

1

1

2

1

2

2

1

2

121

121

2

1 q

i

q

i

iiPG xzN

xzNz

R

q

i

iiPG xxzN

R 2

2

11

1

2 112

1

1

1

2

q

i

i

q

i

i

p

x

x

1

1

2

q

i

iiPG xxzN

R 211

112

2

1

q

i

ipPG xzN

R 11

11

2

1


RPG < 0 Pro-Poor Growth

RPG > 0 Pro-NonPoor Growth

If G > 0 Anti-Poor/NonPoor Recession (also cases with positive per capita

growth but higher population growth)

PPG Rate:

14


Pro-Poor Performance

Φt = Φ / t to compare pro-poorness over time

Φ that would have beeen necessary to meet a given target PG reduction

(halving, eradicating)

Φ that would be necessary to achieve a target given a forecast economic

growth

15

Poverty Gap Target-based Pro-Poor

Performance Trend


Example - Honduras

ϕPG > 0 Pro-Poor Growth

ϕPG < 0 Pro-Nonpoor Growth

16


17

Halving

1992‘s PG

by 2015

with 2004-7

growth


Why using this PPG Index? Because…

It‘s based on the relative approach

it works – it measures:

• if g is pro-poor

• how pro-poor it is

Even politicians can understand it: “how distributional shifts affect the PG“

It focuses on what happens to the poor (or those below a chosen income) –

unlike Gini, GIC or SP

It’s a monitoring and assessment tool over time

It’s calculable with current datasets (expenditure/consumption)

18


Thank you.

19

concepts and operationalisation of pro-poor growth: a ... fileconcepts and operationalisation of...

Documents